FHLB Advances, Other Borrowings and Junior Subordinated Notes Payable

9 Months Ended

Sep. 30, 2014

FHLB Advances, Other Borrowings and Junior Subordinated Notes Payable

The composition of borrowed funds at September 30, 2014 and December 31, 2013 was as follows. Weighted average balances represent year-to-date averages.



	September 30, 2014						December 31, 2013
	Balance		Weighted average balance		Weighted average rate		Balance		Weighted average balance		Weighted average rate
	(Dollars in Thousands)
Federal funds purchased	$	—	$	148	0.81	%	$	—	$	260	0.74	%
FHLB advances	—		4,604		0.16		—		6,471		0.19
Line of credit	10		10		3.29		10		10		3.41
Subordinated notes payable	22,926		10,139		7.16		11,926		11,926		6.92
Junior subordinated notes	10,315		10,315		10.76		10,315		10,315		10.78
	$	33,251	$	25,216	7.36		$	22,251	$	28,982	6.78

Short-term borrowings	$	10					$	10
Long-term borrowings	33,241						22,241
	$	33,251					$	22,251

As of September 30, 2014, the Corporation was in compliance with its debt covenants under its third party senior line of credit. The Corporation pays an unused line fee on its secured senior line of credit. During the nine months ended September 30, 2014 and 2013, the Corporation incurred $10,000 additional interest expense due to this fee.

On August 26, 2014, the Corporation entered into Subordinated Note Purchase Agreements with three accredited investors under which the Corporation issued an aggregate of $15.0 million of subordinated notes (the “Notes”) to the accredited investors. The Notes have a maturity date of September 1, 2024 and will bear interest at a fixed rate of 6.50% per annum for the first five years of the instrument. From and including September 1, 2019 to the maturity date, the interest rate shall reset quarterly to an interest rate per annum equal to the then-current three-month LIBOR rate plus 470 basis points, payable quarterly in arrears.

The Corporation may, at its option, beginning with the interest payment date of September 1, 2019 and on any interest payment date thereafter, redeem the Notes, in whole or in part at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued and unpaid interest to the date of redemption. Any partial redemption will be made pro rata among all of the holders. The Notes are not subject to repayment at the option of the holders.

The Corporation intends to pay approximately $13.5 million of the net proceeds of the Notes as the cash portion of the merger consideration in the previously announced acquisition of Aslin Group, Inc. and its subsidiary, Alterra Bank. The Corporation also plans to retain a portion of the net proceeds to increase its regulatory capital and for general corporate purposes.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details